Hostess Failure Not Union's Fault

You’ve probably heard that Hostess is closing down and putting more than 18,000 people out of work because greedy unions asked for too much. It’s a lie. Ask yourself this: are the problems in our economy because working people get too much, or too little? And if this company can get away with driving down wages and cutting benefits, what will happen to your wages and benefits?

Last Week One Story

Last week Hostess shocked the country with an announcement, they were shutting the company down and said they were doing this because the union representing their employees would not make concessions. The corporate right jumped on the story, explaining to the public that the problem with our economy is unions that help working people get raises, not to mention the unthinkable idea that people should get pensions.

And that offers a disturbing glimpse into the delusional, drunk-with-power mindset of unions — which represent barely 7% of the private work force in the U.S. — as they embark on a second term of way-too-cozy relations with their supplicant in the White House.

…Hostess Brands, Inc. has gone bankrupt, thanks to striking workers who just struck themselves out of a job.

… This is the problem with labor unions. They make companies less nimble, less competitive. A unionized firm takes longer to respond to changing market conditions. It has to negotiate any changes with the union, and unions are not always reasonable. So unionized companies invest less, make less, and create fewer jobs than non-union firms.

Even when workers don’t walk off the job, unions are looking to cause chaos. A union-backed group is planning to stage protests at Wal-Mart stores on Black Friday. And unionized workers with the Service Employees International Union (SEIU) are planning a protest at Los Angeles International Airport tomorrow—one of the busiest travel days of the year.

This Week A Different Story

But guess what – over the weekend a different story started coming out. The private-equity owners had loaded the company down with debt, the CEO had tripled his pay, the union had previously taken a big, big pay cut…

Pushed by a bankruptcy judge eager to save thousands of jobs, Hostess Brands and one of its biggest unions agreed to mediation on Monday, in a last-ditch effort to avoid winding down Hostess, the bankrupt maker of Twinkies and Wonder Bread.

… The two main unions, the bakery workers and Teamsters, countered that years of mismanagement were to blame. The private equity backers had loaded the company with debt, the unions said, making it difficult to modernize Hostess’s bakeries or product offerings. The bakery workers’ president, Frank Hurt, called the private equity owners “vulture capitalists.”

The Union Side Of The Story

The NYTimes article actually told the bakers-union side of the story for the first time: further concessions would not save the company, but would pull down wages and benefits throughout the industry,

After Hostess’s unions had agreed to more than $100 million in annual cost concessions during Hostess’s previous bankruptcy, the bakery union thought it made little sense to agree to further cuts. It feared a deal would pull down wages and benefits throughout the industry, without saving Hostess.

“Our consultant said the debt load on the company was too heavy, and that we would be back in bankruptcy and facing liquidation in 12 to 16 months from now, even if we took more concessions,” David B. Durkee, the union’s secretary-treasurer, said.

The bakery union often derided Hostess’s management, saying it was composed of Wall Street investors and “third-tier managers” from nonbaking companies. It said the investors were trying to “resolve the mess by attacking the company’s most valuable asset — its workers.”

The owners and the executives at Hostess (and so many other companies) padded their own pockets and forced workers to take less pay and cut benefits. Does it really make sense to blame the workers who already took pay and benefit cuts, for resisting more pay and benefit cuts that would drive down wages and benefits for all the other workers at all the other companies in their industry? So when the company does go out of business anyway, the employees end up in a worse situation somewhere else?

The Bigger Picture

There is a bigger picture here, a picture of all of the businesses — the Hostesses, the Walmarts, etc. — across the economy.

Businesses want to succeed financially and look out for their bottom line. So they want to hold down costs which in part means keeping the number of employees and their wages and benefits as low as possible. (Yes, you are a “cost.”) But when all businesses can cut the number of employees and wages and benefits as much as they want, our standard of living goes down, and the economy tanks. And the businesses go down with the rest of us.

And just like how they want to cut costs — employees, wages, benefits — individual businesses and the wealthy also don’t want to pay taxes. But if they all get out of paying taxes our schools and colleges and universities and roads and bridges and ports and courts and the rest of the things that businesses rely on to do well will deteriorate. And the businesses that rely on these things deteriorate with them.

This is where government comes in. Government is We, the People looking at the bigger picture and the longer-term picture and balancing out the desire of business owners to cut jobs and wages and benefits and taxes with the need for working people to have more jobs and good wages and great benefits, and the need for businesses to have good schools and colleges and roads and courts, etc.

Government takes the long view to make sure that we have shared prosperity. Government is supposed to do things like keeping the minimum wage high enough for people to live on, and making sure that working people can organize unions so they can negotiate with the power of the big companies. And government is supposed to take the long view and collect the taxes to pay for the roads and schools and the rest of the things that support the businesses.

When things get out of balance and government is too weak, business owners and executives have all the power while working people have no power. So we see soaring CEO pay, massive concentration of income and wealth at the top and big tax breaks for the rich and big companies, while the infrastructure that supports business deteriorates and working people get layoffs and lose pensions and the economy only provides low-wage dead-end jobs.

Like what we see around us now.

The Bigger, Bigger Picture - The “Fiscal Cliff”

In the middle of the worst economy since the depression — for working people at least — corporate profits are at an all-time high. (Seriously, look at the linked chart.) But big corporations and their billionaire owners are paying the lowest taxes in many, many decades. Many of the biggest corporations are actually paying no taxes at all. And by some coincidence the government isn’t bringing in enough tax revenue and has big budget deficits.

Now with the big “fiscal cliff” scare corporate CEOs and Wall Street bankers — whose jobs are to make money for themselves — are pushing for cuts to Social Security, Medicare, and Medicaid, combined with even more tax cuts for themselves the the big corporations.

Things are bad enough, but they are trying to drive even more cuts in the things We, the People do for each other to make our lives better, while getting even more tax breaks, deregulation, favors, special breaks, etc. for themselves.

Let your Representative in Congress and Senators know that you want unions to be able to organize and negotiate for good wages and benefits, that you want taxes raised on the rich, and want them to focus on jobs not cuts in Social Security and Medicare and the rest of the things you are entitled to as a citizen!

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Dave Johnson (Redwood City, CA) is a Fellow at Campaign for America's Future, writing about American manufacturing, trade and economic/industrial policy. He is also a Senior Fellow with Renew California.

Dave has more than 20 years of technology industry experience including positions as CEO and VP of marketing. His earlier career included technical positions, including video game design at Atari and Imagic. And he was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.

Hostess Failure Not Union's Fault

You’ve probably heard that Hostess is closing down and putting more than 18,000 people out of work because greedy unions asked for too much. It’s a lie. Ask yourself this: are the problems in our economy because working people get too much, or too little? And if this company can get away with driving down wages and cutting benefits, what will happen to your wages and benefits?

Last Week One Story

Last week Hostess shocked the country with an announcement, they were shutting the company down and said they were doing this because the union representing their employees would not make concessions. The corporate right jumped on the story, explaining to the public that the problem with our economy is unions that help working people get raises, not to mention the unthinkable idea that people should get pensions.

And that offers a disturbing glimpse into the delusional, drunk-with-power mindset of unions — which represent barely 7% of the private work force in the U.S. — as they embark on a second term of way-too-cozy relations with their supplicant in the White House.

…Hostess Brands, Inc. has gone bankrupt, thanks to striking workers who just struck themselves out of a job.

… This is the problem with labor unions. They make companies less nimble, less competitive. A unionized firm takes longer to respond to changing market conditions. It has to negotiate any changes with the union, and unions are not always reasonable. So unionized companies invest less, make less, and create fewer jobs than non-union firms.

Even when workers don’t walk off the job, unions are looking to cause chaos. A union-backed group is planning to stage protests at Wal-Mart stores on Black Friday. And unionized workers with the Service Employees International Union (SEIU) are planning a protest at Los Angeles International Airport tomorrow—one of the busiest travel days of the year.

This Week A Different Story

But guess what – over the weekend a different story started coming out. The private-equity owners had loaded the company down with debt, the CEO had tripled his pay, the union had previously taken a big, big pay cut…

Pushed by a bankruptcy judge eager to save thousands of jobs, Hostess Brands and one of its biggest unions agreed to mediation on Monday, in a last-ditch effort to avoid winding down Hostess, the bankrupt maker of Twinkies and Wonder Bread.

… The two main unions, the bakery workers and Teamsters, countered that years of mismanagement were to blame. The private equity backers had loaded the company with debt, the unions said, making it difficult to modernize Hostess’s bakeries or product offerings. The bakery workers’ president, Frank Hurt, called the private equity owners “vulture capitalists.”

The Union Side Of The Story

The NYTimes article actually told the bakers-union side of the story for the first time: further concessions would not save the company, but would pull down wages and benefits throughout the industry,

After Hostess’s unions had agreed to more than $100 million in annual cost concessions during Hostess’s previous bankruptcy, the bakery union thought it made little sense to agree to further cuts. It feared a deal would pull down wages and benefits throughout the industry, without saving Hostess.

“Our consultant said the debt load on the company was too heavy, and that we would be back in bankruptcy and facing liquidation in 12 to 16 months from now, even if we took more concessions,” David B. Durkee, the union’s secretary-treasurer, said.

The bakery union often derided Hostess’s management, saying it was composed of Wall Street investors and “third-tier managers” from nonbaking companies. It said the investors were trying to “resolve the mess by attacking the company’s most valuable asset — its workers.”

The owners and the executives at Hostess (and so many other companies) padded their own pockets and forced workers to take less pay and cut benefits. Does it really make sense to blame the workers who already took pay and benefit cuts, for resisting more pay and benefit cuts that would drive down wages and benefits for all the other workers at all the other companies in their industry? So when the company does go out of business anyway, the employees end up in a worse situation somewhere else?

The Bigger Picture

There is a bigger picture here, a picture of all of the businesses — the Hostesses, the Walmarts, etc. — across the economy.

Businesses want to succeed financially and look out for their bottom line. So they want to hold down costs which in part means keeping the number of employees and their wages and benefits as low as possible. (Yes, you are a “cost.”) But when all businesses can cut the number of employees and wages and benefits as much as they want, our standard of living goes down, and the economy tanks. And the businesses go down with the rest of us.

And just like how they want to cut costs — employees, wages, benefits — individual businesses and the wealthy also don’t want to pay taxes. But if they all get out of paying taxes our schools and colleges and universities and roads and bridges and ports and courts and the rest of the things that businesses rely on to do well will deteriorate. And the businesses that rely on these things deteriorate with them.

This is where government comes in. Government is We, the People looking at the bigger picture and the longer-term picture and balancing out the desire of business owners to cut jobs and wages and benefits and taxes with the need for working people to have more jobs and good wages and great benefits, and the need for businesses to have good schools and colleges and roads and courts, etc.

Government takes the long view to make sure that we have shared prosperity. Government is supposed to do things like keeping the minimum wage high enough for people to live on, and making sure that working people can organize unions so they can negotiate with the power of the big companies. And government is supposed to take the long view and collect the taxes to pay for the roads and schools and the rest of the things that support the businesses.

When things get out of balance and government is too weak, business owners and executives have all the power while working people have no power. So we see soaring CEO pay, massive concentration of income and wealth at the top and big tax breaks for the rich and big companies, while the infrastructure that supports business deteriorates and working people get layoffs and lose pensions and the economy only provides low-wage dead-end jobs.

Like what we see around us now.

The Bigger, Bigger Picture - The “Fiscal Cliff”

In the middle of the worst economy since the depression — for working people at least — corporate profits are at an all-time high. (Seriously, look at the linked chart.) But big corporations and their billionaire owners are paying the lowest taxes in many, many decades. Many of the biggest corporations are actually paying no taxes at all. And by some coincidence the government isn’t bringing in enough tax revenue and has big budget deficits.

Now with the big “fiscal cliff” scare corporate CEOs and Wall Street bankers — whose jobs are to make money for themselves — are pushing for cuts to Social Security, Medicare, and Medicaid, combined with even more tax cuts for themselves the the big corporations.

Things are bad enough, but they are trying to drive even more cuts in the things We, the People do for each other to make our lives better, while getting even more tax breaks, deregulation, favors, special breaks, etc. for themselves.

Let your Representative in Congress and Senators know that you want unions to be able to organize and negotiate for good wages and benefits, that you want taxes raised on the rich, and want them to focus on jobs not cuts in Social Security and Medicare and the rest of the things you are entitled to as a citizen!

This piece was reprinted by Truthout with permission or license. It may not be reproduced in any form without permission or license from the source.

Dave Johnson (Redwood City, CA) is a Fellow at Campaign for America's Future, writing about American manufacturing, trade and economic/industrial policy. He is also a Senior Fellow with Renew California.

Dave has more than 20 years of technology industry experience including positions as CEO and VP of marketing. His earlier career included technical positions, including video game design at Atari and Imagic. And he was a pioneer in design and development of productivity and educational applications of personal computers. More recently he helped co-found a company developing desktop systems to validate carbon trading in the US.